Married to the Peso

— In Mexico City in June of 1994, Pat Nelson took a friend, a Mexican financial consultant, to lunch. "My friend said to me, 'Pat, in '92 and '93 the Mexican government issued short-term bonds that yield 14 to 16 percent.' He went on to explain that foreign banks and institutional investors like Merrill Lynch had bought an astronomical amount of these bonds. The problem was that many of the bonds were about to come due. Mexico was going to have to pay up. Mexico didn't have the money.

"My friend said, 'No one's written about this. Do you want to write about it?' And I said of course I'd write about it, as long as he provided me with all the documentation. He did. I went back to my office at the News, the English-language paper I was working at back then, and I wrote about the short-term bonds in my column, about their coming due. Some months later, the Mexican government announced it was loosening its control of the peso. Everything fell apart. We actually had people calling the paper saying, 'Pat Nelson ruined the peso!' I had to laugh. I responded in my column, saying, 'If only I had that kind of power to influence the Mexican economy. If I did, we wouldn't be in this mess.' I also said it was remarkable that I predicted six of the last four devaluations. They got the joke.

"The '95 devaluation destroyed the Mexican middle class. The short-term bonds story was the biggest story I ever broke."

Nelson, born in Oklahoma, the daughter of a traveling salesman who sold "milking equipment, cream separators, that sort of thing," grew up all over the Midwest. After serving in the Army Air Corps during the U.S. occupation of Japan, Nelson returned to the States hoping to attend college on the G.I. Bill.

"I'd wanted to go to Berkeley or Kenyon. By the time I got back, all the colleges and universities were filled. This Tex-Mex guy who worked with me in Japan had mentioned something about Mexico City College. It'd been approved by the Veterans Administration. I went down to Mexico City and enrolled. I really didn't have any intentions of staying. I ended up spending the next 53 years in Mexico. I guess you could say it was my karma."

In addition to having her tuition paid, Nelson received a $50 monthly stipend from the Veterans Administration. She supplemented her income by teaching English, mostly in Veracruz. When she could, she worked on her degree.

"I'd wanted to study political science, but for a number of reasons I wound up studying economics. Developmental economics. We didn't get much classical or neoclassical economics until I was doing graduate work. I heard a fellow student say the name Keynes. I didn't know who it was. So I went to the library, hit the books, and educated myself. It turns out that studying economics was wise. When I went to Mexico in 1948, President Aleman was in power. The Mexicans referred to him as Aleman and the Forty Thieves. It was understood, it was taken for granted, that Aleman and his cabinet would skim the cream of the Mexican economy for themselves. It was known that they would use their position to become very rich. The Mexican economy has always been unstable and corrupt. The Mexican economy was always going to be a source of news.

"During the Korean War, early '51 to late '53, I was called back into active duty and went again to Japan. When I returned to Mexico, I was very ill. My doctor told me that, between living in Mexico and Japan, I had five different parasites and two kinds of amoebas. He gave me medication and told me I should go to Veracruz to recuperate. It took me a long time to recover. Life in Veracruz was easy. Tennis in the morning. Fishing in the afternoon. I knew I had to get back to Mexico City. So I sat down and wrote three analysis pieces about the Mexican economy. At that time, the government was trying to move heavy industry -- principally the auto industry, which was just about the only heavy industry -- out of Mexico City. Ford. General Motors. Volkswagen. These plants were doing mostly assembly work. The government wanted them to use Mexican materials in the production of their cars. The big boost, you see, would come with all the auxiliary industries.

"But the remarkable thing is that even back then, 50 years ago, the government was aware of the problems attendant to having everything centralized in Mexico City. Fifty years ago the Mexican government began decentralizing its industries. All of Mexico's big problems were evident even back then. The problems were and are longstanding. Everyone wanting to be in Mexico City goes back to colonial times. Everyone wanted to be close to power. That's why you have, for example, the Ministry of Fisheries in, of all places, Mexico City. So, I wrote about the government's drive to get the auto manufacturers out of the city, to have them use Mexican materials. I wrote up these three pieces and took them to the News, an English-language paper that'd been established in 1950. They said they couldn't use the stories but that they did have a job for a reporter in the society pages. Me? Writing for the society pages? I wanted to write about economics. I took my stories to the Mexico City Times, and they bought them. This was in the fall of 1963. I've been writing about the Mexican economy ever since.

"Mexico City was an interesting place to work in. At one time or another, everyone passed through. You met people at cocktail parties. Virginia Hill, Bugsy Siegel's old girlfriend, lived in Mexico City. She had a fabulous apartment on Melchior Ocampo Street. She cut quite a swath through Mexico City's social scene. You met other people. You'd show up at a party and there'd be William Holden. Or you'd see Anthony Quinn walking down the street. For a while, Mexico City was the place to be. Of course, Acapulco was where most of the very famous would hang out.

"And there was always economic news. During the 1970s there was this huge push to develop the oil industry and there were all these petrodollars flowing into the country. It was a crazy time. An insane time. We were all living in a kind of unreality. Even secretaries were traveling, going off to places like India. We all participated in the unreality. In 1976, there was a devaluation, and we lived with the currency's instability for some time. Of course, there were rumors. In Mexico, there are always rumors. At the end of the 1970s, we knew the price of oil was dropping. Mexico was going to have to drop its prices but didn't want to. Rumors were rife that there was going to be another devaluation. By August 1981, the rumors got rifer and rifer. President Zedillo made his famous quote; he said he would 'defend the peso the way a dog defends its bone.' The next day, all over central Mexico City, you saw people wearing little buttons that had a picture of a dog with a bone in its mouth.

"In February 1982, President Portillo announced, 'There would not be a devaluation.' And of course the minute he said that, everyone in Mexico knew that there was going to be a devaluation. All over the country you had bank managers telling their clients to pull their money out of the banks. This infuriated Portillo and led to his nationalizing the banks. Another disaster.

"I remember when he announced it. It was September 1, 1982. The president's State of the Union address. I was sitting in my office, listening to the English-language news. The way these addresses usually went was that, the night before, translators would stay up until all hours, meticulously translating the president's speech into English, French, what have you. Listening to the English announcer, I could tell he didn't have a prepared translation, which was very odd. He was confused. He had to ad lib. I was writing for an economics newsletter at that time, and we were going to press that afternoon. A friend who wrote for AP called me and said, 'Hold off. This is going to be big. No one has a translation of the president's speech.' Sure enough, three quarters of the way through his speech, President Portillo announced he was nationalizing the banks. Everyone was stunned. I heard, but don't know, that the head of Banco de Mexico, the country's central bank, fainted.

"By the late '80s, we were already starting to talk about the Colombia-ization of Mexico. I remember visiting friends in the city of Oaxaca at that time, and they would point out homes to me and say, 'This one belongs to such-and-such drug lord. That home belongs to another.' You really started to become aware of crime right after the big devaluation in 1995. It wiped out so much of Mexico's middle class. It left so many people desperate. In April 1995, a friend of mine in Mexico City went grocery shopping. She'd bought quite a bit, and as she was putting it into the trunk of her car, she was approached by a well-dressed, good-looking man with a gun. He told my friend, 'I'm sorry, but I'm going to have to take your car.' My friend took a taxi home and just as she was about to call the insurance company, she got a phone call from the man who robbed her. He told her where she could find her car. He said, 'I have to apologize. I've never done this before in my life. I've lost my job. I have no money to buy food for my children. The only reason I robbed you was that you had more groceries than anyone else in the parking lot.'

"Immediately after the '95 devaluation, people started hiring bodyguards. They started having bullet-proof glass installed in their cars.

"Mexico City isn't easy to live in, especially not for someone my age. I decided that I'd like to move up to the border, or to San Diego, to be closer to my family. I have family in San Diego. When I got here, earlier this year, I was shocked by the rents. So, I found a place in Tijuana, a little house, out near the racetrack. It seems I can't get away from Mexico, even if I try.

"I guess, deep down, I'd find life in the U.S. too boring -- too, too staid. I was able to witness great changes in Mexico. The urbanization of the country has, of course, been tremendous. But there's been what you'd call 'rising expectations.' There's been too much exposure now to movies, television. People have seen, and have an idea, of a different way of life; a more stable, more prosperous way of life. They see that it might be within their grasp. I never thought that in my lifetime I'd see a bloodless revolution in Mexico. The PRI was so entrenched. But a bloodless revolution has happened. Now it's up to President Fox to see just how far he can carry it through.

"After I moved up here I thought I was through with the Mexican economy. I'd written about it enough. But the News has asked me to start writing a column of economic analysis that will run three times a week. I have no doubt that I'll have plenty of material. Which is why I suppose I stay in Mexico. On one side of the border, everything's predictable. You step one foot into Mexico, and everything's interesting."

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